Monday Update: World Governments Unite in Bank Bail-Outs

After a week of turmoil, the financial world markets leveled off this past Friday, as the Dow snapped a three-week losing streak with its best weekly gain in more than 5 years.

Monday's opening saw the Dow up 208 points, as Federal Reserve Chairman Ben Bernanke said that yet another economic stimulus plan may be in the works to resuscitate the country's slow economic growth.

The tumultuous rollercoaster ride that the stock markets have been on is coupled with unprecedented actions by governments around the world, trying to stabilize individual countries' banking systems. The U.S. $700 billion bailout for banks passed recently by Congress follows European governments shoring up their own banks with direct injections and buying stakes in private banks. European banks are lining up for the estimated $3.3 trillion of guarantees for bank deposits and bank-to-bank lending. Governments are in some cases taking stakes in banks with toxic assets. Among the global notables:

  • Financial Group ING received a 10 billion euro ($13.5 billion) injection from the Dutch government;
  • The Swedish government on Monday outlined a plan worth more than 1.5 trillion crowns ($205 billion) to bail out and support its financial institutions;
  • South Korean authorities on Monday said they would inject $30 billion into banks and exporters, as well as provide guarantees worth $100 billion on foreign debt.

A world financial summit that will be held at Camp David in the coming weeks may see actions taken that would set in motion the reordering of the global financial system. The summit -- actually a series of them -- announced by President Bush over the weekend, will bring together European government leaders to discuss the global financial system.

Their goal will be a broad understanding of the crisis and decisions on global regulatory reforms, the kind that haven't happened since Bretton Woods in 1944. The Bretton Woods conference near the end of World War II changed global monetary policy and encouraged open markets. This Camp David summit has the possibility of creating a new global financial order by taking a proactive approach to solving this financial crisis, observers say.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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